To review: Gensokyo was created as a sanctuary for that which the Outside World has “forgotten”, in particular youkai and gods. More and more of the world’s “supernatural” beings migrate to Gensokyo as they are unable to survive in a world that no longer believes in them.
An important note about gods: They aren’t gods in the Western sense, but “gods” in the Japanese (Shinto) sense. That is, “gods” or “spirits” is the closest translation, but they’re much more numerous than Western gods. In other words, a character being a god doesn’t actually say much about how powerful they are.
What being a god does mean is that they work by different “rules” than youkai. Most important of these “rules” is their need for “faith”. Youkai require the fear of humans to exist, but can still be killed by attacks with sufficient “meaning”. Gods require faith – from humans or youkai – to exist, and can use this faith to manifest additional power or perform various feats.
Basically, youkai need to jump out and say “boo” once in a while, but gods need active worshipers. So surviving outside of Gensokyo is even harder for gods (other than the really popular ones, like Amaterasu).
So, since faith was dwindling, Kanako and Suwako decided to up and move their whole shrine to Gensokyo, all in one go. Sanae, their shrine maiden (pictured, left), came too. Reimu was upset, so she went and beat them up. Such is life.
So why was faith drying up in the Outside World? It seems like a lot of people are still pretty religious, right? Sure, but with the rise of globalization, everyone ends up worshiping the same few gods that are popular worldwide rather than the gods that are popular nearby. It’s like how small businesses are increasingly crowded out by huge corporations, or how people are so concerned about a few popular endangered species but ignore the rest – those without lots of faith have a hard time getting more. Thus, the gods sought a new habitat.
Anyway, Kanako then proceeded to cause every problem for the next three games.